Minnesota has a trio of triple-A general obligation ratings after Moody’s Investors Service upgraded the state to Aaa from Aa1 on Thursday.
The rating agency cited the state’s financial condition, governance, and “high degree” of flexibility to raise revenue and adjust spending for the upgrade, which comes ahead of an approximately $591.5 million new money and refunding GO bond sale in August.
The upgrade “reflects a track record of prudent governance that has driven growth in financial reserves and strong management of long-term liabilities, such as improved pension contributions, that will keep Minnesota’s leverage and fixed cost burdens among the lowest of all U.S. states,” Moody’s said in a statement.
“Also supporting the rating are strong, long-standing economic fundamentals including above average incomes, a diverse industrial mix, high levels of workforce participation, and low unemployment rates,” it added.
Governor Tim Walz hailed Moody’s recognition of his state’s “strong financial position,” noting that relatively few states have a full set of triple-A ratings.
“Getting upgraded by Moody’s is an incredible achievement at any time and particularly on the heels of a historic pandemic that has created uncertainty in the global marketplace,” he said in a statement.
Minnesota Management and Budget Commissioner Jim Schowalter said the state has passed its stress test.
“Sound budgeting practices, smart financial investments and moderate debt levels have helped put Minnesota on sure footing to face whatever national economic headwinds come our way,” he said in a statement. “Across-the-board top bond ratings will help keep the cost of borrowing for future investments in Minnesota as low as possible at a time when interest rates are rising.”
The state had been on a trajectory for an upgrade to Aaa since last year when Moody’s revised the outlook on the Aa1 rating to positive from stable.
S&P Global Ratings affirmed Minnesota’s AAA rating and stable outlook on Thursday, saying they “reflect our view that Minnesota’s structurally balanced 2022-2023 biennium budget and 2024-2025 forecast, which exhibit strong revenue growth and a commitment to maintaining robust reserve balances, will continue to support the state’s AAA credit quality.”
The state’s February forecast raised the general fund surplus by $1.5 billion to $9.253 billion for the biennium that ends June 30, 2023.
Minnesota is also rated AAA by Fitch Ratings. The state last had three triple-A ratings in 2003, according to a Minnesota Management and Budget spokesman.